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Income Tax - Highlights / Catch Notes

Home Highlights December 2020 Year 2020 This

Contingent liability - provision for software expenses - the ...

Income Tax

December 14, 2020

Contingent liability - provision for software expenses - the accounts of the assessee have been audited by the statutory auditors and they did not find any fault with the quantum of provision for software expenses created by the assessee. Hence it is not a case that there was no basis for creating the Provision for software purchases. - claim of expenditure allowed - AT

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  1. Nature of software expenses - these are towards payment for renewal of software which the assessee was using for client deliverables - software expenses are revenue in...

  2. Software expenses - revenue v/s capital expenditure - software may be needed like raw material - computer software expenses were revenue in nature - HC

  3. Software consumable expenses – The expenditure was incurred for application software and not for system software – The software was not of enduring nature and would...

  4. Software expenses - revenue or capital expenditure - real intent and purpose - expenditure incurred by the assessee on software is allowable as revenue expenditure. - AT

  5. Provision for future liabilities (expenses) - whether allowable - mercantile basis of accounting - held yes - HC

  6. Nature of expenses - Expenses incurred on Enterprise Resource Planning (“ERP”) and software expenses - revenue or capital expenditure - in today’s fast changing...

  7. Disallowance of claim of Provision for expenses - unascertained liability or not - By belated receipt of bills, the payment only gets postponed, but not the liability...

  8. Expenses incurred on up-gradation of software do not result into acquisition of any asset nor acquisition of enduring benefits as software become obsolete very quickly -...

  9. Media cost for import of software - Capital expenditure or revenue - Software used for duplication and licensing - expenses allowed as revenue expenditure - HC

  10. Provision for leave salary encashment and gratuity was made by the assessee on the basis of actuarial valuation done by actuary and these are considered as ascertained...

 

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